How Much Does Auto Insurance Cost?

By Cellina LaForey

  • Overview

    How Much Does Auto Insurance Cost?
    The cost for car insurance depends on several factors ranging from the state in which you live to how you drive. Having an understanding of how auto insurance companies rate policies can help you to make decisions that will help to lower your auto insurance costs.
  • Basic Liability

    The cost for auto insurance varies by state, as each state mandates different minimum liability limits. New York, for instance, requires its drivers to carry a minimum of $25,000/$50,000/$10,000, while California requires $15,000/$30,000/$15,000. The first of the three dollar values represents the minimum required limit for bodily injury per person, the second is the limit for bodily injury per accident and the third number represents the minimum limit required for property damage per accident.
  • Additional Limits

    While the state sets the minimum auto liability limits drivers must purchase to legally operate a vehicle on public roads, many policyholders opt to purchase higher liability limits. Purchasing higher auto liability limits will increase the premium cost, but in today's litigious society, the minimal cost for the additional insurance protection is a wise investment. It's better to have the coverage and not need it than vice versa.

  • Comprehensive and Collision

    Another factor that drives the cost of an auto insurance policy is the physical damage coverage. Comprehensive and collision coverages fall under the physical section of the auto insurance policy and is not required by state law. However, physical damage coverage protects the car owner's financial interest and the interest of the finance company or lending institution that holds the loan on the vehicle. Therefore, many drivers opt to purchase physical damage coverage because the lending institutions require it.
  • Deductibles

    Instead of forgoing physical damage coverage in favor of cost savings, vehicle owners can control the size of the physical damage deductible. The higher the deductible, the lower the premium cost. Drivers who can handle higher out of pocket expenses on a per claim basis can opt for high comprehensive and collision deductibles to save on the cost of their auto insurance. Conversely, lower deductibles reduce the out of pocket expense, but increase the cost for the auto policy.
  • Demographic Information

    Auto insurance costs are also affected by each driver's demographics and driving history. Factors such as marital status, driving history and credit history all impact the cost of auto insurance. A young single male driver is considered more of a risk than a mature married driver. Auto insurance companies pass the cost of insuring riskier drivers onto the average policyholder. Similarly, less risky drivers are rewarded in the form of lower insurance premiums.
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